Flexible, easy, fast… Money loans with family or friends are legion, and for good reason: they generally exempt you from paying interest, and are a simple and effective way to finance a life project or to cross an unexpected event. However, it is important to follow a few good practices so as not to break family or friendly ties, but also to avoid ending up in court or in the crosshairs of the tax authorities. Karl Toussaint du Wast, wealth management advisor and founder of NetInvestissement, shared with Planet his sound advice for managing a loan between individuals as well as possible… And making sure to recover your funds.
For the finance specialist, it is essential, when lending money to a loved one, to assume that this sum is given and that it will never be recovered. “Know that nine times out of ten, the repayment period, committed morally or orally, is not respected. Because life is made up of unforeseen events”, assures the expert. Thus, it is essential to lend “only what we do not need”, insists Karl Toussaint du Wast.
On the other hand, know that you have the right to lend the amount you want to anyone. Be careful however: “The context, the duration and the relationship between the beneficiaries are parameters to be taken into account. If I lend 1 million euros to my child, over a period of fifteen years, this can be considered as inheritance. disguised in the event of a tax audit. On the other hand, if I lend the same amount to a friend and he gives it back to me a month later, it immediately seems more justified”, explains the wealth management adviser. Note, moreover, that it is mandatory to declare a loan between individuals to the tax service from 5,000 euros of loan.
What are the precautions to take once you have agreed with a loved one on the amount and duration of the loan?
“Even with your brother, your sister or your best friend, write an IOU. A piece of paper in duplicate signed by both parties is enough”, advises Karl Toussaint du Wast. “Beyond the moral aspect, you will be protected in the event of a tax audit, because your loan can be considered as a disguised donation. Then, this document will be authenticated by a notary in the event of death to borrow it”, continues -he.
Finally, if you are lending a large sum of money, it is preferable to present the acknowledgment of debt to a notary. Rest assured: there is no need to specify how the funds will be used, or when the debt must be repaid.
Cheque, cash, transfer… Finally, how is it recommended to make the loan?
The acknowledgment of debt has the front to formalize the transaction. “Four lines are enough!”, assures Karl Toussaint du Wast. To protect you as much as possible, the wealth management advisor recommends making the loan by bank transfer or cheque. “The bank transfer is the best option because it is personalized and therefore allows you to keep track. It can be defended in court,” concludes the finance expert.
If your loved one delays repaying you, or refuses to return the funds, you can present the acknowledgment of debt in court.